As crypto recovers, sponsorship issues remain
Jessica Williams has led sponsorships since 2021 at cryptocurrency exchange Coinbase, which has a portfolio that includes NBA rights, and team deals with the Bulls and Knicks. Her years have been a volatile time with a lot of marketing spending: exchanges FTX, Crypto.com, Coinbase and eToro all bought ads in the 2022 Super Bowl.
During his tenure, Williams has seen leading cryptocurrencies Bitcoin and Ethereum plunge to two-year lows, amid the bankruptcy of scholarship exchange FTX, which had its mark on the uniforms of MLB umpires for most of the past two baseball seasons.
BlockFi, another crypto exchange, filed for Chapter 11 bankruptcy protection last November. Coinbase’s publicly traded shares reflect this uncertainty, from a 12-month high (as of last week) of $154.93 in April of last year to $32.46 in late 2022 — a steep 477% drop.
Through all that turbulence, there was one constant.
“The incoming calls from sponsorship sellers didn’t and haven’t slowed down at all,” Williams said.
Coinbase’s share price had recovered to $67.36 (last week) and Bitcoin has climbed to $29,535.50 from last year’s low of $15,649. Williams said the Coinbase brand has seen significant increases in awareness, favorability and likelihood to use Coinbase, especially among NBA fans. Accordingly, the Exchange will likely renew these agreements as they arise.
But how much are crypto rights worth after FTX? What will become of cryptocurrency, once the speedster of sports sponsorship but now relegated to ride-hailing vehicle status?
“We like it them [sponsorships] has done for our brand,” said Williams. “But so much has changed, we have to make sure we’re paying market value then.”
Crypto.com, a jersey sponsor for the 76ers, has weathered the storm. But the teams are cautious about new agreements.getty pictures
With seemingly digital speed, crypto has gone from the shiny new Bitcoin in sponsorship marketing, with naming rights deals in NBA arenas, to top-shelf sponsorships with F1 and UFC, to a category no major property dares approach. A category that was responsible for setting record prices is now dormant as Cape Cod Beach Resort in February.
Just as marketing spend is inexorably tied to sales, so crypto’s sponsorship future will be tied to the level of trading. “Crypto went on life support, but its heart is still beating and I see it coming back as the overall market recovers,” said Randy Bernstein, managing director i Playfly Premier Partnership, who performed strategy and asset evaluation work for crypto brands including Bittrex. “Financial services always have trouble differentiating, and eventually they will need a flagship property to do just that.”
“There has to be a level of trust before we put anything in front of the fans, and we want to be very careful,” the MLB CRO said Noah Gardenwho developed the FTX MLB sponsorship, “but I think it’s a real category, and part of the challenge with any new business is to shake out the real players.”
Wait and see approach
Adam Davis sold Crypto.com the 76ers jersey ad patch when he was chief commercial officer at Harris Blitzer Sports. “Really, it’s brands like Crypto.com that can now say ‘we weathered the storm,'” said Davis, now managing director, North America, at the agency Two circles, “but the stigma is still there, so I would say we are 18 months away from a deal. Right now, no check is big enough.”
Even on the sell side, some were treating crypto like it was COVID. While selling naming rights for the Louisiana Superdome two years ago, Oak View Group’s Dan Griffis rejected an offer from FTX that was 20% more than Caesars Entertainment’s winning bid.
“We explicitly told our team to stay away,” said Griffis, OVG’s president of global partnerships. “As long as that [crypto] remains unregulated, we are still not interested. We don’t have such a high risk tolerance.”
When crypto was a leading sponsorship category, bank sponsors, many of whom financed the venues they subsequently sponsored, or may have owned, had to defend what they believed to be well-established category rights. “Some teams agreed with it, some didn’t,” the Chase sponsor said Frank Nakano, which compared the bursting crypto bubble to the Spongetech scandal of the 2010s. Expect the crypto/banking friction to continue. “Crypto didn’t exist when we did a lot of our partnerships, so we’ve changed [contract] language, and we will continue to do so, regardless of what happens in that category,” Nakano added.
Crypto exchanges were like steroids for a sponsorship industry desperate for home runs after the financial pain of the pandemic. According to Sponsor-United, the number of crypto sponsorship deals across North American and European sports grew from 20 brands and 55 deals in 2020 to an astonishing 173 brands supporting 419 deals in 2022.
“Crypto is a cautionary tale that our industry must learn from,” said Elizabeth Lindsey, Wasserman president of brands and properties, whose firm won a highly contested agency of record assignment for FTX in early 2022. Among many others in the industry, Lindsey says blockchain technology and NFTs will have a far more profound impact on sports than crypto. Blockchain’s authentication, which is allegedly unhackable, and the “ledger effect,” where a permanent secondary market is built in via the blockchain, could be solutions to long-standing industry problems.
“It means creators and owners of music or sports can worry less about protection and receive better compensation,” Lindsey said. “It makes sense for any owner of valuable IP.”
The crypto bubble gave blockchain a general black eye. Andrew CohenVisa’s vice president of global sponsorship strategy, observed, “crypto became this catch-all address, which is probably a misnomer. Blockchain and things like digital loyalty with NFTs as a foundation could be a fundamental part of sports and entertainment. But it’s unclear yet whether they will be a sponsorship category or just an opportunity for additional revenue generation.”
It’s a question the industry will be looking at, especially if the price of cryptocurrency continues to rebound.
“Blockchain technology is versatile and highly applicable to many of our businesses,” said MLB’s Garden. “Is there a financial services manager on the line? I don’t know yet.”
Estimates of the total global value of cryptocurrency run as high as $1.3 trillion – down a third from a year ago.
“Crypto will never be as high-flying as it was,” said Jason PearlSan Francisco Giants senior vice president of business development, “but it’s not going away. We’re at least a year away from any significant deals, but there are some stable companies in the area, so maybe soon will be the best time for them to start telling that message to the world.”
Terry Lefton can be reached at [email protected]
